Is Prepaid Insurance An Expense Or Revenue?

Where is revenue on balance sheet?

Revenue is shown on the top portion of the income statement and reported as assets on the balance sheet.

Revenue is heavily dependent on the demand for a company’s product..

What are examples of prepaid expenses?

What is considered a prepaid expense?Rent (paying for a commercial space before using it)Small business insurance policies.Equipment you pay for before use.Salaries (unless you run payroll in arrears)Estimated taxes.Some utility bills.Interest expenses.

Which type of account is prepaid?

A prepaid expense is a type of asset on the balance sheet that results from a business making advanced payments for goods or services to be received in the future. Prepaid expenses are initially recorded as assets, but their value is expensed over time onto the income statement.

What type of asset is prepaid insurance?

Prepaid insurance is usually considered a current asset, as it becomes converted to cash or used within a fairly short time. But if a prepaid expense is not consumed within the year after payment, it becomes a long-term asset, which is not a very common occurrence.

Why is account payable not an expense?

Accounts payable is a liability account, not an expense account. However, under accrual accounting, the expense associated with an account payable is recorded at the same time that the account payable is recorded.

What is Accounts Payable journal entry?

Accounts Payable Journal Entries refers to the amount payable accounting entries to the creditors of the company for the purchase of goods or services and are reported under the head current liabilities on the balance sheet and this account debited whenever any payment is been made.

Is Accounts Payable a revenue or expense?

While accounts payable on an income statement only occurs as an expense, the AP department plays a critical part in the financial control panel.

Is Accounts Payable a debit or credit?

When you pay off the invoice, the amount of money you owe decreases (accounts payable). Since liabilities are decreased by debits, you will debit the accounts payable. And, you need to credit your cash account to show a decrease in assets.

Is prepaid expense a real account?

Prepaid expense is not a Real Account. It is a Personal Account.

What is the entry for prepaid expenses?

The initial journal entry for prepaid rent is a debit to prepaid rent and a credit to cash. These are both asset accounts and do not increase or decrease a company’s balance sheet. Recall that prepaid expenses are considered an asset because they provide future economic benefits to the company.

Is prepaid insurance a revenue?

When a business pays for services or goods in advance, it is a prepaid expense. When a company is paid before performing the work, that’s prepaid revenue. They both go on the balance sheet, but in different accounts under prepaid expenses on the asset side and unearned revenue on the liability side.

How is prepaid insurance recorded?

A prepaid expense can be recorded initially as an expense or as a current asset. … The current month’s insurance expense of $1,000 ($6,000/6 months) is reported on each month’s income statement. The unexpired amount of the prepaid insurance is reported on the balance sheet as of the last day of each month.

Where does prepaid insurance Go on income statement?

Prepaid insurance is the portion of an insurance premium that has been paid in advance and has not expired as of the date of a company’s balance sheet. This unexpired cost is reported in the current asset account Prepaid Insurance.